footwear wholesaling in australia industry report (1)

8/21/2019 Footwear Wholesaling in Australia Industry Report (1)

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2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance

4 Executive Summary

4 Key External Drivers

5 Current Performance

7 Industry Outlook

10 Industry Life Cycle

12 Products & Markets

12 Supply Chain

12 Products & Services

13 Demand Determinants

14 Major Markets

15 International Trade

16 Business Locations

18 Competitive Landscape

18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

19 Basis of Competition

20 Barriers to Entry

20 Industry Globalisation

22 Major Companies

22 Pacific Brands Limited

23 Nike Australia Pty Ltd

24 Adidas Australia Pty Ltd

26 Operating Conditions

26 Capital Intensity

27 Technology & Systems

27 Revenue Volatility

28 Regulation & Policy

28 Industry Assistance

29 Key Statistics

29 Industry Data

29 Annual Change

29 Key Ratios

30 Jargon & Glossary

IBISWorld Industry Report F3714Footwear Wholesalingin AustraliaAugust 2013 Claudia Burgio-Ficca

Finding its feet:Slow revenue growth will bedriven by the shift to premium products

www.ibisworld.com.au | (03)9655 3881 | [email protected]


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WWW.IBISWORLD.COM.AU Footwear Wholesaling in Australia August 2013 2

Industry operators primarily purchase arange of footwear products frommanufacturers and sell these goods toretailers, generally with minimum or nofurther development of the items. Mostwholesalers in the industry undertake

sales and administrative activities, suchas establishing relationships withmanufacturers and retailers to ensure thereliable supply and demand of stock,marketing and advertising their products,and storage and transportation of stock.

The primary activities of this industry are

Mens footwear wholesaling

Womens footwear wholesaling

Childrens footwear wholesaling

Work-related footwear wholesaling

Unisex footwear wholesaling

Industry Definition

Main Activities

Similar Industries

Additional Resources

IBISWorld writes over 500 Australianindustry reports, which are updatedup to four times a year. To see allreports, go towww.ibisworld.com.au

The major products and services in this industry are

Childrens shoes

Mens shoes

Other footwear

Womens shoes

About this Industry

C1352 Footwear Manufacturing in Australia

Footwear manufacturers produce footwear.

G4252 Footwear Retailing in Australia

Industry participants sell boots, shoes and other forms of footwear to customers.

For additional information on this industry

www.ausindustry.gov.auAusIndustry

www.tfia.com.auCouncil of Textile & Fashion Industries of Australia Limited

www.ragtrader.com.auRagtrader


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Market Share

Pacic Brands

Limited 13.7%

NIKE Australia PtyLtd 6.3%

adidas AustraliaPty Ltd 5.7%

Key External DriversDemand fromfootwear retailing

Demand fromdepartment stores

Real householddisposable income

Trade-weighted index

Consumersentiment index

Key StatisticsSnapshot

Industry at a GlanceFootwear Wholesaling in 2013-14

Revenue

$2.0bnProfit

$128.4mWages

$80.0mBusinesses

177

Annual Growth 14-19

1.1%Annual Growth 09-14

-1.1%

Industry Structure Life Cycle Stage DeclineRevenue Volatility Low

Capital Intensity Medium

Industry Assistance Medium

Concentration Level Low

Regulation Level Light

Technology Change Low

Barriers to Entry Medium

Industry Globalisation Low

Competition Level High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29

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Demand from footwear retailing

SOURCE: WWW.IBISWORLD.COM.AU

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Revenue Employment

Revenue vs. employment growth

Establishments

32.4%NSW

2.3%TAS

31%VIC

0.4%ACT

0.3%NT

16.8%QLD

10.3%WA

6.5%SA


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Key External Drivers Demand from footwear retailingDemand for footwear at the retail levelinuences the level of new orders

received by footwear wholesalers. Asretail demand for footwear increases,there is a corresponding rise in the levelof new footwear orders for wholesalers.Demand from footwear retailing isexpected to increase in 2013-14 due to anupturn in retail trading conditions.

Demand from department storesAlong with footwear retailers,department stores are key suppliers offootwear products. An increase indemand for footwear across departmentstores creates new orders for footwearwholesalers to ll. Demand fromdepartment stores is expected to decline

in 2013-14 due to continued caution inconsumer spending. This is a potentialthreat to the industry, as it may hinder

revenue growth.

Real household disposable incomeTrends in real household disposableincome inuence demand for footwear atthe retail level. As disposable income rises,consumers are able to spend more ondiscretionary purchases such as footwear,boosting new orders for wholesalers.Disposable income is expected to increaseover 2013-14. This is a potentialopportunity for the industry to boost salesthrough higher retail orders.

Trade-weighted indexThe value of the Australian dollar,

ExecutiveSummary

The Footwear Wholesaling industry hasstruggled over the past ve years, withrevenue expected to contract by anannualised 1.1% through 2013-14.Trading conditions across the industryhave been affected by declines in theprice of shoes and an increase inwholesale bypass activity. Fluctuations inretail demand for footwear along withvariations in disposable income,consumer sentiment and the tradeweighted index also inuenced industry

performance during the period. Industryprotability has suffered due to strongcompetition between players and declinesin product margins. Industry revenue isexpected to post weak growth of 1.0% toreach $2.0 billion in 2013-14.

Footwear prices over the past veyears have been negatively affected bycontinued growth in the number ofimports from low-cost producingcountries. The resulting decline in theaverage price of footwear hinderedrevenue growth and constrained

protability for operators. The collapse ofglobal nancial markets led to adeterioration in economic conditions,rising unemployment and weakconsumer sentiment. Despitegovernment stimulus payments, sales

were affected by the changing domesticclimate. Price discounting tactics by mostmajor footwear retailers and departmentstores eroded product margins andindustry protability. Falling protmargins encouraged some industryparticipants to exit the industry,demonstrated by the signicantcontraction in establishment andemployment numbers.

Industry revenue is forecast to postweak annualised growth of 1.1% over the

next ve years, reaching $2.1 billion in2018-19. While consumer expenditureon footwear is set to increase, footwearretailers are expected to continuebypassing wholesalers in preference tobuying directly from manufacturers.Industry import volumes will beinuenced by an anticipated decline inthe trade weighted index, makingimports more expensive. Continuedcompetition across the industry will leadto further consolidation in enterpriseand establishment numbers during the

period. Despite this, industryprotability is forecast to post slowgrowth over the next ve years due to ashift in focus by wholesalers fromlow-cost imports to premium productsand services.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage


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Industry Performance

The economicdownturn

The demand for goods provided by thisindustry is dependent upon footwearconsumption levels at the retail level, andthis is affected by factors includingconsumer sentiment, householddisposable income and unemployment.The Australian economy suffered adownturn in 2008-09, narrowly avoidinga recession. Consumer sentimentdeclined sharply for the year,

constraining discretionary spending asnervous consumers put their money intosavings. However, household disposableincome increased over 2008-09 due tothe Federal Governments two economicstimulus packages, low interest rates andpetrol prices, which supported retailspending for the year.

Expenditure on footwear at thedownstream retail level weakened during

CurrentPerformance

Footwear wholesalers have struggledover the past ve years, with revenueexpected to contract an annualised 1.1%through 2013-14. Revenue has beenconstrained by declines in the price offootwear, wholesale bypass and theimpact of the nancial crisis.Protability has suffered, with

wholesalers reducing product margins ina bid to maintain their competitive edge.

Trading conditions for wholesalers havealso been inuenced by the performanceof the industrys key external driversincluding demand from footwearretailers and department stores, trendsin real household disposable income andconsumer sentiment and uctuations inthe trade-weighted index. Industry

revenue is expected to grow 1.0% toreach $2.0 billion in 2013-14.

Key External Driverscontinued

compared with its major tradingpartners, affects the FootwearWholesaling industry. An increase in thevalue of the Australian dollar boosts theaffordability of imported products,making overseas footwear items moreaccessible for wholesalers. The trade-weighted index is expected to decrease in2013-14 due to fears regarding thestrength of the domestic economy.

Consumer sentiment indexFluctuations in consumer sentimentinuence the level of retail spending byconsumers. An increase in sentimentreects a rise in optimism amongconsumers, leading to higher spendingon discretionary items such as footwear.Consumer sentiment is expected toincrease in 2013-14 due to an upturn ineconomic and political stability.

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The economicdownturn continued

this period, which owed on towholesalers. Based on Australian Bureauof Statistics (ABS) data, retail spendingon clothing, footwear and accessories fell1.0% in 2008-09. This followed growth inthe previous two years. IBISWorldexpects that these factors combinedcaused industry revenue to contract by1.7% for the year.

The overall economy improved over2009-10, and consumer sentimentincreased during the rst part of the year.

Consumers were generally encouraged byrelatively low interest rates, rising houseprices and the news that Australia hadavoided a recession. However, consumersentiment fell several times in the secondhalf of the year, following a series ofinterest rate rises by the Reserve Bank. Inthe absence of further government scalstimulus payments, household disposableincome growth weakened, whichconstrained spending by households.

Retail growth weakened as 2010-11progressed, and consumers remained

concerned over economic uncertaintyoverseas and increased their savings.The country reached its steepest savingsrate in half a century. According to ABSdata, retail spending on footwear andassociated products posted weak growth

(in nominal terms) during the year,reecting the shift on consumerconsumption patterns towards savvierproduct choices. Retail spending onfootwear and associated productscontinued to decline in 2011-12, leadingto a second year of successive declines inrevenue for industry wholesalers.Footwear consumption patterns rose

over 2012-13 and this trend is expectedto continue into 2013-14. Industryrevenue during this period has beendriven by continued growth indisposable income levels and an upturnin consumer sentiment.

Falling profitability Industry operators have struggled toremain protable over the past ve years.The continued trend in wholesale bypass,

coupled with the ow-on effects of theglobal nancial crisis, led to lower protmargins and capital difculties.Wholesalers and retailers were forced toimplement a wide range of strategies toboost their bottom lines. Many operatorsoverhauled their supply chains andimplemented cost-saving measures duringthe economic slowdown. The effects ofgovernment stimulus payments toconsumers peaked in the June quarter of2009, but did little to alleviate the toughtrading environment in which textile,clothing and footwear retailers andwholesalers operate in the longer term.

Over the past ve years, wholesaling

margins have reduced as demand growsfor retailers to discount footwear.Discount retailers have grown solidly,

while department stores have struggled.Wholesale margins are expected tonarrow further as fewer or cancelledorders from retailers lead to moreaggressive retail price markdowns.Wholesalers have been forced to becomelow-cost providers to remain protable.This means that the majority of licenceagreements that wholesalers heldpreviously are now controlled bymanufacturers based in foreign countries,where labour costs less andenvironmental regulations are less strictthan in Australia.

Overall, protability among majorplayers within the industry is steadier

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Revenue and profitIndustry revenue is forecast to post weakgrowth over the ve years through 2018-19. Despite a rise in disposable incomelevels, volatility in consumer sentiment

will soften spending on footwear at theretail level. As a result, new wholesaleorders for footwear will be hindered byuctuations in retail activity. Continued

IndustryOutlook

Footwear wholesalers are expected toface further difculties over the next veyears, with revenue forecast to post weakannualised growth of 1.1% through2018-19. Trading conditions will beinuenced by changing retail demandpatterns and continued pressure onproduct margins, which will suppress

protability. Industry performance is alsoexpected to be driven by variations in keyexternal drivers including trends in realhousehold disposable income, consumersentiment and uctuations in the tradeweighted index. Industry revenue isexpected to grow 1.3% in 2014-15 andreach $2.1 billion by 2018-19.

Falling profitabilitycontinued

than for smaller players. The FootwearWholesaling industry is still expected tomaintain a low concentration level due tothe large number of small players in theindustry. Although industryconcentration remains low, trends inother parts of the wholesaling divisionsuggest that concentration may rise inthe future. This is despite the number ofsmall operators with limited nancialresources to merge operations. Risingconcentration in retailing means that

more retailers are ordering on a national

scale. Independent footwear wholesalersand internal wholesaling divisions offootwear manufacturers are expected tobenet from improvements in inventorymanagement, distribution systems andlogistics over the period. These efciencygains are expected to ease cost pressuresgenerated from footwear manufacturersand retailers. Retailers and footwearmanufacturers dominated much of theincreased import purchases, andwholesalers did not benet much from

tariff reductions.

Participation andcustomers

Over the ve years through 2013-14,industry enterprise and establishmentnumbers are expected to havecontracted, as players chose to exit dueto falling prot margins and difculttrading conditions. Enterprise numbersare expected to fall at a faster rate thanestablishments, which suggests theindustry has undergone a period of

rationalisation. Meanwhile, the numberof employees per establishment hasfallen as establishments struggled toremain protable.

Many footwear retailers areundertaking wholesale bypass andcontacting manufacturers directly ratherthan using the services of wholesalers, inorder to improve prot margins andmaintain a competitive edge.

International footwear retail chainsincluding Aldo and Novo are increasingcompetition due to their economies ofscale, giving them the ability to controloperations from the manufacturing levelthrough to retail. Effectively, these typesof companies are increasingly bypassingthe services offered by the industry. Inaddition, department stores and

supermarkets have started to offer awider selection of footwear. Big W andMyer have started aggressive storeexpansions in recent years, thusincreasing competition for smallerretailers, which are the main customersof the industry. Again, these departmentstores are large enough to undertakewholesale bypass, placing furtherpressure on industry operators.


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Revenue and profitcontinued

growth in retailers bypassing thewholesale function and sourcing productsdirectly from manufacturers is alsoexpected to suppress revenue growth.

Industry trading conditions are likelyto be inuenced by continued growth inimport penetration, albeit at aconsiderably slower rate than the veyears through 2013-14. Imports alreadydominate the Australian market, aided inpart by a tariff reduction introduced in2010. Import growth is expected to

plateau over the next ve years as themarket reaches capacity. Import levelsare also expected to be inuenced by anoverall decline in the trade weightedindex, which will decrease the value ofthe Australian dollar, making importsmore expensive. Footwear wholesalerswill nd it hard to compete with cheapfootwear imports during this period, duelargely to footwear manufacturers andretailers attempting to control price andproduct margins.

Industry protability is projected to rise

marginally over the ve years through2018-19. Footwear wholesalers are

expected to move away from competingwith low-end imports and to invest moreresources into developing premiumproducts and services. This is consistentwith similar trends in other textilemarkets. Logistics and supply-chainmanagement will be critical factorsaffecting the competitiveness of theindustry. The Australian market will morereadily embrace prints and designs oncethey have already been proven in theEuropean and North American markets.

Customers are also demanding a fasterturnaround of these designs, as fashionwebsites instantly inform consumerseverywhere of the new developments infashion capitals. Given this, the success ofa wholesaler in this new marketenvironment is dependent on its ability tomake these designs available in theshortest time frame and at the cheapestprice. Many textile wholesalers seeking tobring products to market more quicklywill need to invest resources into theirlogistics systems in order to remain

competitive in the medium term, and toimprove protability.

Competition Industry competition is expected toincrease as a result of rising import levelsand continued growth in wholesalerbypass. As a result, furtherconsolidations across the industry willlead to a contraction in enterprise andestablishment numbers during the

period. Employment levels are alsoforecast to decline over the next veyears, leading to fall in wage costs foroperators. Major industry participantshave engaged in acquisition activity toincrease market presence andprotability. The sports and leisurefootwear segments will experienceslightly stronger growth, as participantssuch as Adidas and Nike are subsidiariesof global companies with the advantageof economies of scale and largemarketing budgets. This will cushion theimpact of decreasing prot levels, whichwill be a pervasive trend for other

industry operators.Variables in long-term forecast

conditions include changes in fashiontrends. A new style can potentially boostindustry revenue through effectivemarketing or product innovations.Discretionary spending on footwear

could be materially reduced in periods ofeconomic uncertainty or during periodsof pessimistic sentiment. Rising internetpurchases from manufacturers overseasrepresent a leakage of industry demand.

Specialty footwear wholesalers willcontinue to face strong competition fromtraditional department stores that areable to offer a broad selection of brand-name shoes right across the pricespectrum. A strong international supplyinfrastructure also provides acompetitive advantage in globalsourcing. Department stores have strongbuying power and are able to get


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Competitioncontinued

discounts on bulk purchases. However,this is also a weakness, as they tend tostock a broad range of shoes and to avoidniche areas. This represents an

opportunity for footwear wholesalers atthe high end of the price spectrum,where the exclusivity of fashionablebrands will ensure strong margins.


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Footwear retailers are increasinglybypassing wholesalers and buying

directly from manufacturers

Growth rates are consistently below therate of growth in the overall economy

There are stable and clearlysegmented product groups

Life Cycle Stage


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%Growthinshareofeconomy

% Growth in number of establishments-10 -5 0 5 10 15 20

DeclineShrinking economic

importance

Quality GrowthHigh growth in economicimportance; weaker companiesclose down; developedtechnology and markets

MaturityCompanyconsolidation;level of economicimportance stable

Quantity GrowthMany new companies;minor growth in economicimportance; substantialtechnology change

Key Features of a Decline Industry

Revenue grows slower than economy

Falling company numbers; large firms dominate

Little technology & process change

Declining per capita consumption of good

Stable & clearly segmented products & brands

Footwear Manufacturing

Sport and Camping Equipment RetailingFootwear Retailing

Department Stores

FootwearWholesaling


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Industry Life Cycle Industry wholesalers are expectedoperate in the decline phase of their lifecycle over the 10 years through 2018-19.The declining life cycle status can beattributed to the weak growth in valueadded, decline in establishment numbersand well segmented product market.

The industry is expected to postannualised growth in value added of0.3% over the 10 years through 2018-19,compared with annualised growth intotal Australian GDP of 2.5% over the

same period. Growth in value added beenaffected by a decline in the average priceof footwear, due to an increase in thelevel of imports from low-cost producingcountries, keeping prices down. Industryvalue added has also been affected byfootwear retailers, includingindependent, chain and departmentstores, who have continually sought

direct links with manufacturers in orderto compete more effectively for theconsumer dollar.

Industry enterprise and establishmentnumbers have trended downwards,reecting continued consolidation acrossthe industry. The decline in enterpriseand establishment numbers can also beattributed to increased wholesaler bypassactivity in the industry.

The declining life cycle status of theindustry can also be attributed to the

product market for footwear, which isstable and clearly segmented. However,the sports and leisure footwear wholesalesegment, including major players Nike andAdidas, is partially cushioning the declineevident across other wholesale segments,such as womens fashion footwear, whichhave been signicantly affected by thetrend towards wholesale bypass.

This industryis Declining


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Products & Services The product market for footwearwholesalers comprises four keycategories: womens shoes, mens shoes,childrens shoes and other footwear. Therelative share of each segment has postedmodest change over the past ve yearsdue to variations in consumer demand.

Womens shoesWomens shoes dominate the footwear

wholesale market, accounting for 49.3%of industry revenue in 2013-14. As aproportion of industry revenue, thissegment has remained relatively stableover the past ve years. Shoes forwomen come in a broad selection ofprices, styles and colours. Womentypically spend more on shoes andpurchase more shoes than men. Thisvariation is largely a function of fashionand aesthetic motivations with regard to

style. Women also tend to demand amuch broader range of shoes than mendo. Given the large proportion of fashionshoes sold, margins for womens shoesare also materially higher than marginsfor other segments.

Mens shoesMens shoes are the second largestproduct segment, accounting for 27.4% of

industry revenue in 2013-14. Over thepast ve years, there has been a shiftwithin the mens shoe segment fromathletic shoes to casual and fashionablestreet shoes. The decline in demand forathletic shoes weakened margins forretailers selling brands such as Nike,Adidas and Reebok. As a result, growth insegment revenue over the past ve yearshas been offset by the slight contractionin mens athletic shoe sales. Mens shoes

KEY BUYING INDUSTRIESG4241 Sport and Camping Equipment Retailing in Australia

The industry supplies outdoor and athletic footwear to these stores.

G4252 Footwear Retailing in AustraliaFootwear wholesalers supply footwear to shoe stores.

G4260 Department Stores in AustraliaThe industry supplies a range of footwear to department stores.

KEY SELLING INDUSTRIES

C1352 Footwear Manufacturing in AustraliaFootwear manufacturers supply a range of footwear to wholesalers.

Products & MarketsSupply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations

Supply Chain

Products and services segmentation (2013-14)

Total $2.0bn

49.3%Women's shoes27.4%

Men's shoes

17.2%Children's shoes

6.1%Other footwear



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Products & Markets

DemandDeterminants

The industry provides footwear toindependent footwear retailers, footwear

retail chains and department stores.Demand from retailers is largely driven byfashion trends and consumer spendinghabits. Retailers demand products thatmeet the needs of their customers in orderto ensure inventory turnover. Fashioncycles have become shorter over the pastve years as consumers seek to keepup-to-date with the latest trends. Seasonalchanges also dictate the type of footweardemanded by consumers. For example,boots are popular in winter, while sandals

sell more easily during the winter season.Wholesalers need to offer suitable andon-trend ranges of footwear to maintainstrong relationships with footwear retailers.

The demand for footwear is closelyassociated with real household disposableincome and consumer sentiment.Increases in income and consumersentiment lead to greater expenditure onconsumer goods such as footwear.

However, as with most developedeconomies, as general income levels

increase, households spend less onproducts and more on services. Basicclothing is not a discretionary item andincreases in population levels leads togreater demand for clothing and apparel.The price of footwear relative to othergoods is a signicant factor. As the priceof clothing falls relative to other products(due to increased levels of cheapimports), consumers are willing topurchase larger volumes of footwear.

Structural changes in footwear

retailing and tariff reductions affectdemand. Retailers are tending to buydirectly from the manufacturer, therebybypassing wholesalers. Falling tariffsover the past decade have made importedfootwear more affordable. The increase inproduction from the low-cost Asianmanufacturing region is contributing tolower prices, rendering localmanufacturers relatively uncompetitive.

Products & Servicescontinued

come in a smaller variety of styles andcolours than womens shoes. There is stilla reasonably broad range of mensfootwear products with regard to priceand quality. Discounting has also beenprevalent at the low end of the market, asa lack of differentiation has increased thecommoditisation of products.

Childrens shoesThe childrens shoes segment has grownfrom an almost non-existent base to

account for 17.2% of industry revenue in2013-14. Childrens and infants shoes areless affected by fashion trends and aremore focused on practicality and comfort.Childrens footwear was once a highlycommoditised area where the major basisof competition was price. Due to thetrend for fewer children per household in

Australia, parents are spending more onthose children. The market for higherpriced and fashionable childrens shoeshas contributed to growth in the relativesize of this segment over the past veyears. The size of this segment, as aproportion of industry revenue, has alsobeen inuenced by growth in Australiasbirth rate.

Other footwearOther footwear accounts for 6.1% of

industry revenue in 2013-14. Footwearin this segment includes unisexfootwear, footwear used for medicalreasons and work footwear that is notgender specic. As a proportion onindustry revenue, the other footwearsegment has remained relativelyunchanged over the past ve years.


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Products & Markets

Major Markets The major markets for footwearwholesalers include speciality footwearretailers, discount stores, departmentstores and other retailers. The relativesize of each major market has undergonemodest change over the past ve years,due to trends in consumer shoppinghabits and the type of footwear sold byeach retailer.

Specialty storesSpecialty stores are expected to represent

the single largest market for footwearwholesalers, accounting for 35.0% ofindustry revenue in 2013-14. As aproportion of revenue, the specialty storesegment has remained relatively stableover the past ve years. Consumerdemand for footwear from specialtystores has been inuenced by volatility ineconomic conditions due to the globalnancial crisis.

Discount StoresDiscount stores are regarded as the

fastest growing retail channel forfootwear, surpassing department storesand accounting for 31.0% of industryrevenue in 2013-14. Discount stores offerconsumers a large number of brand nameproducts, but do not charge the highprices generally associated with these

products. Growth in discount stores hasdrawn the interest of wholesalers, whoview them as potentially more lucrativepartners than department stores. As aresult, brand name merchandise isnding its way into these stores.

Department storesDepartment stores are expected toaccount for 18.0% of industry revenuein 2013-14. The relative share ofindustry revenue generated by this

segment has declined over the past fiveyears. The growing buying power ofdepartment stores has made it easierfor them to bypass the wholesalingfunction and source directly fromoverseas or local manufacturers insteadof local wholesalers.

Other retailersThe other retailers segment includes hobbyand surf-wear retail stores, safety footwearretailers, mixed footwear stores, campingand uniform stores, specialty hobby stores

and internet retailers. The other retailerssegment is expected to account for 16.0%of industry revenue in 2013-14. Therelative size of this segment has posted amodest rise over the past ve years, largelydue to growth in the volume of purchasesmade via internet retailers.

Major market segmentation (2013-14)

Total $2.0bn

35%Specialty footwear retailers

31%Discount stores

18%Department stores

16%Other retailers



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Products & Markets

International Trade The industry is heavily involved indistributing both imported and exportedfootwear. Imports are purchased fromoverseas manufacturers and otherwholesalers, while exports are purchasedfrom domestic manufacturers to be soldoverseas. By convention, the actual valueof imported and exported goods is notaccounted for at the footwear wholesalinglevel. Rather, it is accounted for at theupstream manufacturing level.

ImportsFootwear imports are expected to postweak growth over the ve years through2013-14. Import volumes during thisperiod have been affected by the globalnancial crisis and the resultingdownturn in the domestic economy.

China is the largest supplier of footwearto Australia due to its lower cost ofproduction over other footwearmanufacturing countries. Other keyimport countries include Vietnam, Italyand Indonesia.

ExportsFootwear exports are expected to declineover the ve years through 2013-14. Exportdemand has been hinder by the collapse ofglobal nancial markets and continued

issues of price competitiveness comparedwith low cost producers such as China.Growth in the value of the Australian dollarover the past ve years has also affectexport volumes. Key export countriesinclude New Zealand, Israel, Papua NewGuinea, and the United Kingdom.


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Products & Markets


TAS2.3

WA10.3

QLD16.8

VIC31.0

NSW32.4

NT0.3

SA6.5

ACT0.4

Establishments (%)

Cold Zone (


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Products & Markets

Business Locations The geographic spread of the industry isclosely related to the populationdistribution for each of the states. NewSouth Wales, Victoria and Queenslandcombined account for approximately80% of footwear wholesaling locations.Hence, footwear wholesalers tend to belocated in states that are more populatedas they have relatively higher levels ofconsumer demand.

New South Wales is expected toaccount for 32.5% of total industry

establishments in 2013-14. Footwearwholesalers in New South Wales benetfrom the higher income earned by thisstates residents compared to the nationalaverage. In addition, the state supports awide range of footwear retailers, whichwork closely with wholesalers to ensuresupply meets consumer demand.

Victoria is regarded as the secondlargest market for footwear wholesalers,accounting for 28.3% of total industryestablishments in 2013-14. Like NewSouth Wales, Victorians are expected to

spend more per capita on footwear thanthe national average in 2013-14. Statedemand for footwear is driven bypopulation levels, a wider variety ofproducts and styles on offer, higheraverage incomes and higher prices.

Queensland has exhibited strongpopulation growth over the past veyears, leading to growth in industryestablishments. However, the states

population share is expected to behigher than industry establishmentsand revenue, which suggests a loweraverage spend by consumers. This inpart can be attributed to weather

conditions, which encourage the use oflower-price sandals, thongs andsummer-themed footwear. The high-end fashion footwear market in the stateis also small relative to New SouthWales and Victoria. The share ofindustry establishments relative to thepopulation suggests that store growthwill continue in this state, as morewholesalers expand or enter the market.

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Cost StructureBenchmarks

The industry is highly fragmented, withthe top three players accounting for lessthan 30.0% of industry revenue. As aresult, cost structures vary widelybetween industry participants. While

larger companies incur greater costs,these companies operate at lower perunit costs due to economies of scale.Smaller companies that operate at lowercosts do so at the expense of volume.

ProfitReturns do not account for a largeportion of the industry. The retailindustry in Australia has been extremelycompetitive over the past ve years.Wholesalers have been forced to engagein intensive promotional activity withcustomers, keeping margins low. Lowreturns are also the result of theindustrys declining life cycle stage, with

a high level of competition from domesticand foreign companies. Industry playershave also been subject to pressures fromdownstream retailers and consumers forlower-price products.

PurchasesPurchases are the single largestexpense item for industry operators,and are characteristic of businesses inthe Wholesale Trade division. Over thepast five years, purchase costs havedeclined due to the high Australiandollar and lower interest rates.Footwear is subject to variable fashionand seasonal trends, so wholesalersfocus on moving stock quickly to makethe most of a particular trend. It isessential for footwear wholesalers tohave sufficient stock on hand to meetcustomer demand. Products are sold to

Key Success Factors Guaranteed supply of key inputsOperators require solid agreements withmanufacturers that products will bedelivered on time and as ordered.

Having contacts within key marketsWholesalers benet from holding aportfolio of retail clients, as opposed torelying on one business for the majorityof their revenue.

Ability to alter goods and servicesproduced in favour of market conditionsThe range of footwear on offer to retailers

should meet price and fashion trends asdemanded by consumers.

Ability to avoid wholesale bypassWholesalers need to ensure theyremain price and product competitive,or risk being bypassed by retailerswho will source products directlyfrom manufacturers.

Having marketing expertiseWell-developed sales and marketingskills are essential for a successfulwholesaler.

Market ShareConcentration

The industry is characterised by a lowlevel of concentration as the top fourplayers account for less than 40.0% ofthe market. In addition to the topplayers, the industry also supports arange of smaller sized operators.Barriers to entry and capital investmentfor players are both at a medium level.As a result, new operators are notsignicantly impeded from entering theindustry. Furthermore, the industry isin the decline phase of its life cycle,

characterised by a fall in establishmentnumbers, clearly segmented productgroups and continued impact ofwholesaler bypass.

Concentration has increased over thepast ve years due to consolidation ofsmall operators, with limited nancialresources. Growth in concentration levelsat the retail level has also enhanced theability of larger sized retailers to bypasstraditional wholesalers and purchasefootwear directly from manufacturers.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalisation

Level

Concentration inthis industry is Low

IBISWorld identifies250 Key SuccessFactors for abusiness. The mostimportant for thisindustry are:


19/31


Competitive Landscape

Basis of Competition Footwear wholesalers face high levels ofcompetition and the trend is increasing.Internally, operators compete on thebasis of price, product range and quality.Externally, the industry is subject tostrong competition from manufacturerswho supply directly to end market andbypass the wholesale process.

Internal competitionPrice is the main basis of competitionbetween players. Wholesalers need tooffer footwear products at a competitiveprice in order to secure repeat orderswith retail customers. At the higher endof the market, brand name footwear isgenerally associated with better-quality

Cost StructureBenchmarkscontinued

major markets, generally withoutfurther processing, modification ordevelopment of the goods.

Wages and depreciationWages are expected to account for lessthan 5.0% of industry revenue, whiledepreciation accounts for less than 2.0%,reecting the industrys tendency toavoid substantial capital costs. Capitalexpenditure consists primarily ofpurchases of ofce equipment,

warehouse machinery and computersoftware. This reects the labour-intensive nature of the industry. Staff are

required to provide clients withpersonalised attention and haveextensive product knowledge.

OtherOther expenses include insurance, freightcosts and advertising costs. Insurancecosts have increased over the past veyears. Freight costs have been inuencedby growth in petrol prices. Industryadvertising costs tend to be high due tothe greater prot margins received from

the branding of products. Larger playersin the industry encounter signicantresearch and development costs.

Sector vs. Industry Costs

Profit

Rent

Utilities

DepreciationOther

Wages

Purchases

Average Costs of

all Industries in

sector (2013-14)

Industry Costs

(2013-14)

0

20

40

60

Percentage

ofrevenue

80

100 4.8

78.6

7.1

6.41.00.7

1.3 6.5

75.0

4.110.31.3 1.01.8


Level & Trend

Competition in

this industry isHigh and the trendis Increasing


20/31



IndustryGlobalisation

The industry has a low level of globalisation,and the trend is increasing. The majority ofindustry players are locally based and onlyoperate in Australia. As a result, the level offoreign ownership is low. However,globalisation levels have increased due togrowth in footwear imports and theoutsourcing of production functions byfootwear manufacturers.

The wholesale function has changedconsiderably over the past two decades.Wholesaler once strive to ensure

distribution between supplier andretailer was performed at maximumefficiency. Today, the ability to selectsources and production in line withrequired inventory levels, sales andbudgets may require overseeingoperations, teams and marketingcampaigns in various locationsworldwide. Along with this, a greatercollaborative working style betweencompanies, buyers and productdevelopers is becoming more

Barriers to Entry The industry has medium barriers toentry, and the trend is increasing. Theindustry is operating in the declinestage of its life cycle stage and growingat a slower rate than the overalleconomy. Changes in the industrysbuyers marker reect the growing trendfor manufacturers and retailers tobypass traditional wholesalers.Furthermore, existing contracts andagreements between established

retailers and wholesalers can make itdifcult for new wholesaling companiesto gain clients. Licence agreementsprovide wholesalers with exclusivedistribution of certain brands.

Industry competition levels are high.Operators compete on the basis of price,product range and quality. They are alsosubject to strong competition frommanufacturers and importers seeking ashare of the market. Capital intensity forthe industry is medium. Key investment

requirements include transportation

vehicles, warehouse facilities andcomputerised systems that enableproduct ordering and tracking. Thesecosts may hinder the entry of newplayers, given the low requirement forlabour by the industry.

The industry has a low level of marketshare concentration. Generally, thiswould entice new players into theindustry. However, strong competitionacross the industry has led to the exit or

consolidation of smaller sized operators.

Basis of Competitioncontinued

items. As a result, competition is basedon the ability of wholesalers to securecontract for the supply of brandedmerchandise. At the middle and lowerend of the market, wholesalers need toprovide retail customers with a widevariety of footwear that meet the priceand fashion trends demanded byconsumers. The level of after salesservice, geographic location and deliveryreputation of wholesalers are also

important basis of competition betweenindustry players.

External competitionThe industry is subject to signicantcompetition from manufacturers. Growthin the number of retailers sourcingproducts directly from local andinternational manufacturers has affectedthe competitiveness and revenue base forindustry players.

Barriers to Entry checklist Level

Competition High

Concentration Low

Life Cycle Stage Decline

Capital Intensity Medium

Technology Change Low

Regulation & Policy Light

Industry Assistance Medium


Level & Trend

Barriers to Entryin this industry areMedium and Steady

Level & Trend

Globalisation inthis industry isLow and the trend

is Increasing


21/31



IndustryGlobalisationcontinued

important as larger retailersincreasingly manufacture their ownbrands. Meeting targets on price,quality and delivery targets forwholesalers was always important inthis industry. Furthermore, the ability

to manage relationships with Chinesefactories and suppliers to ensureproduct lines are replenished at theshortest possible lead times, whilestill ensuring lowest possible cost isjust as important.


22/31


Player Performance Pacic Brands operates as a majorsupplier, manufacturer and retailer of

footwear, clothing and textiles. Thecompany is listed on the Australian andNew Zealand stock exchanges and isadministered from its head ofce inHawthorn, Victoria. Companyoperations are divided into threesegments: underwear, workwear andHFO (homewares, footwear andouterwear). Financial results for the yearended 30 June 2012 indicate that thecompany generated $1.3 billion in totalrevenue. Company operations relevantto the industry are conned to the

wholesale of footwear.The Pacic Brands footwear group is

the largest manufacturer and supplier offootwear in Australia. The companycontrols several brands including JuliusMarlow, Clarks, Hush Puppies, Grosbyand Volley. The company also operates inthe United Kingdom through whollyowned subsidiary Pacic Brands (UK)Limited. A signicant proportion offootwear manufacturing is carried outoffshore, by foreign rms, to company

specications and standards. Pacic

Brands also imports footwear fromvarious countries.

Established in 1893, Pacic Brandsoriginally traded as Pacic Dunlop as amanufacturer of bicycle tyres. Thecompany began producing footwear andother sporting goods in the 1930s, andstarted making mattresses in 1960. Thecompany entered the textile, clothing andfootwear manufacturing sector in the1970s with the acquisition of underwearand sock manufacturer Holeproof. ThePacic Brands division of Pacic Dunlop(Ansell) was created in 1985, followed bythe acquisition of underwear producer

Bonds in 1987. In 2012, Pacic Brandswas nearly acquired by US-based privateequity rm Kohlberg Kravis Roberts,which made an offer worth $600.0million. While no formal acquisitionprocedures took place, the offer led toincreased interest from other parties.

Financial performancePacic Brands industry specic revenuecontracted an annualised 0.6% over theve years through 2012-13,

underperforming the industry (in nominal

Major CompaniesPacific Brands Limited | Nike Australia Pty Ltd

Adidas Australia Pty Ltd | Other Companies

Major players(Market share)

74.3%Other

Pacific Brands Limited 13.7%

Nike Australia Pty Ltd 6.3%

Adidas Australia Pty Ltd 5.7%


Pacific Brands industry segment performance*

YearRevenue

($ million) (% change)EBIT

($ million)

2007-08 270.8 -3.4 36.4

2008-09 256.1 -5.4 -19.6

2009-10 267.2 4.3 5.1

2010-11 247.8 -7.3 -61.4

2011-12 261.4 5.5 13.1

2012-13 262.2 0.3 13.3

*EstimateSOURCE: IBISWORLD

Pacific BrandsLimitedMarket share: 13.7%Industry Brand NamesKing GeeVolleyJulius MarlowClarksSlazengerGrosby


23/31


Major Companies

Player Performance Nike Australia Pty Ltd operates as awholesaler and retailer of sporting footwear,clothing and equipment. Established in1992, the company is a wholly ownedsubsidiary of the US-based Nike Inc and isadministered from its head ofce inAbbotsford, Victoria. Financial results forthe year ended May 2012 indicate that thecompany generated $203.1 million in

revenue. Company operations relevant tothe industry only include those activitiespertaining to footwear wholesaling.

In November 1998, Nike Inc. opened itsrst Niketown store in Australia, located inthe Melbourne CBD. With over 1,200square metres of selling space, Niketownstocked 85.0% to 90.0% of the companysproduct range, as opposed to a maximumof 25.0% of the Nike product range carriedby any single Australian retailer. While

Nike closed the agship Melbourne storein February 2007 (due to poor trading),the company has since expanded to 26stores Australia wide (except for in theNorthern Territory and the ACT).

Financial performanceNike Australias industry-specic revenuerose an annualised 1.4% over the ve years

through 2012-13, outperforming the widerindustry (in nominal terms). Following thecollapse of the global nancial markets,Nike Australia announced plans toreorganise its global business and create sixnew geographical groups as part of anongoing restructure in 2009. The objectiveof the restructure was to bring goods closerto market and reduce management overlap.While the restructure boosted revenue andprot in 2009-10, nancial results

Player Performancecontinued

terms). Industry specic protabilityremained volatile during the period, dueto weak retail conditions as a result of theglobal nancial crisis and its lingeringeffects on the Australian economy. Theweak retail market led Pacic Brands torestructure its operations and implementa number of initiatives, including a shift tooffshore sourcing and manufacturing andthe divestment of non-core brands. Theperformance of the footwear, outerwearand sport segment also suffered due to

currency effects (the delayed effects of

currency declines) and stock writedowns.Industry specic protability posted solidreturns over the two years through2012-13, due largely to the due to thebenets attained with offshore sourcingand the high Australia dollar. Additionally,the companys Volley brand gainedsignicant exposure after beingannounced as the ofcial casual shoe forthe Australian Olympic team in 2012. Thecompany also launched a new range ofKing Gee safety boots, which aided the

growth in protability.

Nike Australia Pty Ltd industry segment performance*

YearRevenue


($ million)

2007-08 113.0 N/C 2.1

2008-09 115.0 1.8 -3.7

2009-10 118.0 2.6 6.0

2010-11 117.0 -0.8 2.1

2011-12 120.0 2.6 1.7

2012-13 121.0 0.8 1.8

*Estimate SOURCE: IBISWORLD

Nike Australia PtyLtdMarket share: 6.3%Industry Brand NamesNike


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Major Companies

Player Performance Adidas Australia Pty Ltd operates as awholesaler and retailer of sportingfootwear, apparel and equipment underthe Adidas and TaylorMade brands.Established in 1992, the company is partof Germany-based Adidas Group, a

global producer of sportswear and sportsequipment. Australian operations areadministered from its head ofce inMulgrave, Victoria. Financial results forthe year ended December 2011 indicatethat Adidas Australia generated $180.4million in total revenue and employed355 people. Company operationsrelevant to the industry include footwearwholesaling activities.

Financial performanceAdidas Australias industry-specic revenue

rose an annualised 1.4% over the ve yearsthrough 2012-13, outperforming in thewider industry. While other industryplayers focused on reducing debt and

restructuring operations to remaincompetitive, Adidas relied on its brandname to weather the retail storm over thepast ve years. Adidas Australias strongperformance prior to the global nancialcrisis can be attributed to strong retail

demand of the companys Autumn/Winter2007 Womens Collection and thesuccessful promotion of the ICC WorldTwenty20 Tournament. In addition, resultsfor 2006 were boosted by interest from theCommonwealth Games and the World Cup,coupled with the integration of Reebok intothe Adidas AG group. However, subsequentto the global downturn, Australian andinternational demand for discretionaryfootwear softened, evidenced by thecompanys contracting revenue over mostof the period. Industry-specic protability

is expected to have posted mixed resultsover the past ve years, due to volatility intrading conditions and variations inproduct margins.

Player Performancecontinued

contracted in 2010-11 and remained weakover the two years through 2012-13.Industry-specic prot also suffered over

the past ve years as product margins wereslashed in a bid to move stock through theslower trading environment,

Adidas Australia PtyLtdMarket share: 5.7%

Adidas Australia Pty Ltd industry segment performance**

Year*Revenue


($ million)

2007 102.0 N/C 2.5

2008 105.0 2.9 0.4

2009 112.0 6.7 5.02010 108.8 -2.9 6.0

2011 108.0 -0.7 7.0

2012 109.5 1.4 5.0

*Year end December **EstimateSOURCE: IBISWORLD

Other Companies A number of overseas companies havedistribution rights to high-profilebrands. Many operators in the industryare small firms that employ fewer than10 people. These participants oftenimport a variety of footwear brands and

distribute them to a wide number ofretail outlets.

Associated Retailers LimitedEstimated market share: 2.0%Associated Retailers Limited operates as


25/31


Major Companies

Associated Retailers Limited financial performance

Year

Revenue

($ million) (% change)

EBIT

($ million)

2007-08 242.0 N/C 2.4

2008-09 257.1 6.2 2.7

2009-10 293.3 14.1 3.3

2010-11 275.4 -6.1 -0.9

2011-12 269.1 -2.3 4.1

2012-13 238.7 -11.3 N/C

SOURCE: ANNUAL REPORT

Other Companiescontinued

a large buying and marketing group.Established in 1961, Associated Retailersis an unlisted public company withoperations in Australia and NewZealand. The companys brands includeCamping World, Compleat Angler,Manchester House, Mensland, Shoex,Sportscene, Sportspower and Toyworld.

As a buying intermediary betweenmanufacturers and retailers, AssociatedRetailers is able to deliver purchasingeconomies, enabling its members toobtain textile products at cheaper pricesfrom manufacturers. Total companyrevenue for the year ended June 2013 isreported to have reached $238.7 million.


26/31


Capital Intensity The industry exhibits a medium level ofcapital intensity. For every dollar spenton wages, $0.31 is spent on capital.Wages are one of the industrys smallerexpenses and are incurred through theneed to sell, handle and move stock.These roles do not add much value to theproducts and as a result, advances incomputer technology have led to theautomation of an increasing number ofthese tasks.

Wholesalers do encounter some capital

expenditure costs such as the purchaseand maintenance of large eets ofvehicles for transporting goods, mobilephones for communication between staff,large commercial wholesaling propertiesfor housing stock, and IT systems fortracking and ordering stock. Technologyis used for stock control, inventorymanagement and supply chainmanagement. As the industry continues

to adopt new technology to increaseoperating efciencies, capital intensitywill continue to increase and labourintensity will continue to fall. This alsopartially explains why margins are lowwithin the industry.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


LabourInten

sive

Cap

italIntensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services,Health and Education.Firmsbenefit from personal wealth sostable macroeconomic conditionsare imperative. Brand awarenessand niche labour skills are key toproduct differentiation.

Traditional Service Economy

Wholesale and Retail.Relianton labour rather than capitalto sell goods. Functions cannotbe outsourced therefore firmsmust use new technologyor improve staff training toincrease revenue growth.

Old Economy

Agriculture and Manufacturing.Traded goods can be producedusing cheap labour abroad.To expand firms must mergeor acquire others to exploiteconomies of scale, or specialisein niche, high-value products.

Investment Economy

Information, Communications,Mining, Finance and RealEstate. To increase revenuefirms need superior debtmanagement, a stablemacroeconomic environmentand a sound investment plan.

Sport and Camping Equipment RetailingFootwear Retailing

DepartmentStores Footwear

Wholesaling

Footwear Manufacturing

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labour unit

FootwearWholesaling

WholesaleTrade

Economy

Level

The level of capitalintensity is Medium


27/31


Operating Conditions

Revenue Volatility Industry revenue exhibits a low degree ofvolatility. Volatility can increase asdemand for footwear changes in responseto trends in consumer preferences,

fashion styles and seasonal needs.Footwear is regarded as a basic itemrequired by most consumers. As a result,the industry is subject to a natural levelof footwear sales each year. Theabsorption of the footwear wholesalingfunctions by manufacturers and retailers

has also inuenced the industry volatility.Growth in wholesaler bypass hascontinued to erode the revenue potentialfor the industry.

Other factors may also inuence theperformance of industry revenue includingtrends in real household disposableincome, consumer sentiment anductuations in the trade weighted index.For more information on these see the KeyExternal Drivers section of this report.

Technology & Systems The industry exhibits a low level oftechnological change. The maintechnological development to affect theindustry has been the electronicmanagement of the supply chain.Distribution management software (e.g.Eclipse and iDistribute) provides completeend-to-end supply chain managementsolutions by combining planning,execution, collaboration and monitoringcapabilities. Supply-chain managementsoftware allows inventory to be stored on

a national or international basis, requiringfewer regional distribution centres.Internet technology is used to

communicate product informationglobally. This has furtherinternationalised global supply chains in

the worldwide footwear industry, withcompanies operating in variousinternational locations.

Adopting XML (Extensible MarkupLanguage) is expected to cut transactioncosts as distributors and manufacturerswill be able to exchange businessdocuments electronically. Documentswill be able to be tagged and can then bemore easily translatable than in HTML.

Radio-frequency identication (RFID)technology is being introduced to make

existing supply-chain processes moreefcient. Products are tagged with chipsthat announce their identity when hitwith a non-line-of-sight electromagneticeld. This assists with forecastingdemand and managing inventory levels.

Level

The level ofTechnologyChange is Low


Volatility vs Growth

Revenuevolatility*(%

)

1000

100

10

1

0.1

Five year annualised revenue growth (%)

30 10 10 30 50 70

Hazardous

Stagnant

Rollercoaster

Blue Chip

* Axis is in logarithmic scale

Footwear Wholesaling

A higher level of revenuevolatility implies greaterindustry risk. Volatility cannegatively affect long-term

strategic decisions, such asthe time frame for capitalinvestment.

When a firm makes poorinvestment decisions itmay face underutilisedcapacity if demandsuddenly falls, or capacityconstraints if it risesquickly.

Level

The level ofVolatility is Low


28/31


Operating Conditions

Industry Assistance Tariff rates for footwear were reducedfrom 10.0% to 5.0% in 2010. Theindustry is covered by umbrella anti-dumping legislation that protects it from

imports at excessively cheap prices.Furthermore, industry participants areeligible to claim a 125% tax concessionfor research and development costs.

Regulation & Policy There are no major governmentregulations that affect the industry.Firms must adhere to generalregulations regarding businessoperations such as health and safetyregulations, trading hours, theCompetition and Consumer Act (2010),tenancy regulations and copyright laws.Industry operators also need to abide bygeneral occupational health and safetyregulations for their workers.

Companies must also abide by

environmental laws in relation topollutants and discharges into theenvironment. While no formal regulation

relates to this, preparation for this is vitalfor companies that want to remaincompetitive. According to IBISWorld, therelatively small the size of Australiastextile, clothing and footwear sector onthe global scale means it should be ableto adapt quickly and implement industry-wide changes to create a formidable,sustainable competitive advantage.

For mens footwear, Australianmanufacturers follow mens shoe sizingfrom the United Kingdom. For womens

footwear, domestic manufacturers followthe US and Canadian womens footwearshoe-sizing system.

Level & Trend

The level ofRegulation isLight and thetrend is Steady

Level & Trend

The level of IndustryAssistance isMedium and thetrend is Decreasing


29/31


Key StatisticsRevenue

($m)

IndustryValue Added

($m) Establishments Enterprises Employment Exports ImportsWages($m)

DomesticDemand

2004-05 2,108.0 241.2 287 184 1,712 -- -- 83.8 N/A

2005-06 2,127.6 244.8 289 187 1,743 -- -- 84.9 N/A

2006-07 2,111.9 241.9 299 192 1,793 -- -- 87.1 N/A2007-08 2,123.1 242.4 301 191 1,804 -- -- 87.4 N/A

2008-09 2,087.8 238.8 299 189 1,734 -- -- 84.6 N/A

2009-10 2,101.5 239.5 295 187 1,709 -- -- 83.5 N/A

2010-11 1,994.4 231.3 293 184 1,701 -- -- 83.0 N/A

2011-12 1,928.1 225.7 288 180 1,672 -- -- 81.2 N/A

2012-13 1,954.8 229.1 289 181 1,676 -- -- 81.7 N/A

2013-14 1,975.0 231.0 285 177 1,634 -- -- 80.0 N/A

2014-15 2,000.7 234.5 283 175 1,624 -- -- 79.2 N/A

2015-16 2,016.7 237.3 279 172 1,598 -- -- 77.8 N/A

2016-17 2,038.9 239.2 279 171 1,588 -- -- 77.1 N/A

2017-18 2,067.4 242.0 277 169 1,570 -- -- 76.1 N/A

2018-19 2,090.1 245.7 274 164 1,560 -- -- 75.3 N/A

Sector Rank 36/43 39/43 42/43 40/43 42/43 N/A N/A 41/43 N/A

Economy Rank 367/629 513/629 470/629 437/628 559/629 N/A N/A 565/629 N/A

IVA/Revenue(%)

Imports/Demand(%)

Exports/Revenue(%)

Revenue perEmployee

($000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of theEconomy

(%)

2004-05 11.44 N/A N/A 1,231.31 3.98 5.97 48,948.60 0.02

2005-06 11.51 N/A N/A 1,220.65 3.99 6.03 48,709.12 0.02

2006-07 11.45 N/A N/A 1,177.86 4.12 6.00 48,577.80 0.022007-08 11.42 N/A N/A 1,176.88 4.12 5.99 48,447.89 0.02

2008-09 11.44 N/A N/A 1,204.04 4.05 5.80 48,788.93 0.02

2009-10 11.40 N/A N/A 1,229.67 3.97 5.79 48,858.98 0.02

2010-11 11.60 N/A N/A 1,172.49 4.16 5.81 48,794.83 0.02

2011-12 11.71 N/A N/A 1,153.17 4.21 5.81 48,564.59 0.02

2012-13 11.72 N/A N/A 1,166.35 4.18 5.80 48,747.02 0.02

2013-14 11.70 N/A N/A 1,208.69 4.05 5.73 48,959.61 0.02

2014-15 11.72 N/A N/A 1,231.96 3.96 5.74 48,768.47 0.01

2015-16 11.77 N/A N/A 1,262.02 3.86 5.73 48,685.86 0.01

2016-17 11.73 N/A N/A 1,283.94 3.78 5.69 48,551.64 0.01

2017-18 11.71 N/A N/A 1,316.82 3.68 5.67 48,471.34 0.01

2018-19 11.76 N/A N/A 1,339.81 3.60 5.69 48,269.23 0.01

Sector Rank 27/43 N/A N/A 13/43 38/43 23/43 33/43 39/43

Economy Rank 598/629 N/A N/A 49/629 607/629 363/629 417/629 513/629

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Revenue(%)

IndustryValue Added

(%)Establishments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

DomesticDemand

(%)

2005-06 0.9 1.5 0.7 1.6 1.8 N/A N/A 1.3 N/A

2006-07 -0.7 -1.2 3.5 2.7 2.9 N/A N/A 2.6 N/A

2007-08 0.5 0.2 0.7 -0.5 0.6 N/A N/A 0.3 N/A

2008-09 -1.7 -1.5 -0.7 -1.0 -3.9 N/A N/A -3.2 N/A

2009-10 0.7 0.3 -1.3 -1.1 -1.4 N/A N/A -1.3 N/A

2010-11 -5.1 -3.4 -0.7 -1.6 -0.5 N/A N/A -0.6 N/A

2011-12 -3.3 -2.4 -1.7 -2.2 -1.7 N/A N/A -2.2 N/A

2012-13 1.4 1.5 0.3 0.6 0.2 N/A N/A 0.6 N/A

2013-14 1.0 0.8 -1.4 -2.2 -2.5 N/A N/A -2.1 N/A

2014-15 1.3 1.5 -0.7 -1.1 -0.6 N/A N/A -1.0 N/A

2015-16 0.8 1.2 -1.4 -1.7 -1.6 N/A N/A -1.8 N/A

2016-17 1.1 0.8 0.0 -0.6 -0.6 N/A N/A -0.9 N/A

2017-18 1.4 1.2 -0.7 -1.2 -1.1 N/A N/A -1.3 N/A

2018-19 1.1 1.5 -1.1 -3.0 -0.6 N/A N/A -1.1 N/A

Sector Rank 29/43 26/43 38/43 40/43 40/43 N/A N/A 40/43 N/A

Economy Rank 467/629 429/629 535/629 563/628 571/629 N/A N/A 568/629 N/A

Annual Change

Key Ratios

Industry Data



30/31


Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean thatnew companies struggle to enter an industry, while lowbarriers mean it is easy for new companies to enter anindustry.

CAPITAL INTENSITY Compares the amount of moneyspent on capital (plant, machinery and equipment) withthat spent on labour. IBISWorld uses the ratio ofdepreciation to wages as a proxy for capital intensity.High capital intensity is more than $0.333 of capital to$1 of labour; medium is $0.125 to $0.333 of capital to$1 of labour; low is less than $0.125 of capital for every$1 of labour.

CONSTANT PRICES The dollar figures in the KeyStatistics table, including forecasts, are adjusted forinflation using the current year (i.e. year published) asthe base year. This removes the impact of changes inthe purchasing power of the dollar, leaving only thereal growth or decline in industry metrics. The inflationadjustments in IBISWorlds reports are made using theAustralian Bureau of Statistics implicit GDP pricedeflator.

DOMESTIC DEMAND Spending on industry goods andservices within Australia, regardless of their country oforigin. It is derived by adding imports to industryrevenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time,temporary and casual employees, working proprietors,partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed andkeeps management accounts. Each enterprise consistsof one or more establishments that are under commonownership or control.

ESTABLISHMENT The smallest type of accounting unitwithin an enterprise, an establishment is a singlephysical location where business is conducted or whereservices or industrial operations are performed. Multipleestablishments under common control make up anenterprise.

EXPORTS Total value of industry goods and services soldby Australian companies to customers abroad.

IMPORTS Total value of industry goods and servicesbrought in from foreign countries to be sold in Australia.

INDUSTRY CONCENTRATION An indicator of thedominance of the top four players in an industry.Concentration is considered high if the top playersaccount for more than 70% of industry revenue.

Medium is 40% to 70% of industry revenue. Low is lessthan 40%.

INDUSTRY REVENUE The total sales of industry goodsand services (exclusive of excise and sales tax); subsidieson production; all other operating income from outsidethe firm (such as commission income, repair and service

income, and rent, leasing and hiring income); andcapital work done by rental or lease. Receipts frominterest royalties, dividends and the sale of fixedtangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value ofgoods and services produced by the industry minus thecost of goods and services used in production. IVA isalso described as the industrys contribution to GDP, orprofit plus wages and depreciation.

INTERNATIONAL TRADE The level of internationaltrade is determined by ratios of exports to revenue andimports to domestic demand. For exports/revenue: low isless than 5%; medium is 5% to 20%; and high is morethan 20%. Imports/domestic demand: low is less than5%; medium is 5% to 35%; and high is more than35%.

LIFE CYCLE All industries go through periods of growth,maturity and decline. IBISWorld determines anindustrys life cycle by considering its growth rate(measured by IVA) compared with GDP; the growth rateof the number of establishments; the amount of changethe industrys products are undergoing; the rate oftechnological change; and the level of customeracceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses withno paid employment or payroll, also known asnonemployers. These are mostly set up by self-employedindividuals.

PROFIT IBISWorld uses earnings before interest and tax(EBIT) as an indicator of a companys profitability. It iscalculated as revenue minus expenses, excludinginterest and tax.

VOLATILITY The level of volatility is determined byaveraging the absolute change in revenue in each of thepast five years. Volatility levels: very high is more than20%; high volatility is 10% to 20%; moderatevolatility is 3% to 10%; and low volatility is less than3%.

WAGES The gross total wages and salaries of allemployees in the industry. Benefits and on-costs areincluded in this figure.

Industry Jargon

IBISWorld Glossary

LEAD TIME The time from the moment a supplierreceives an order to the moment it is received by thepurchaser.

OFFSHORING The transfer of manufacturingoperations to another country, regardless of whetherthe work is outsourced or stays within the samecorporation or company.

RFID Radio-frequency identification, which is an objector tag that is applied to a product, person or animal forthe purpose of tracking and identification using radiowaves.

WHOLESALE BYPASS A trend whereby the wholesaler isbypassed in the supply chain, such as when retailerspurchase directly from the manufacturer.


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